OUTLOOK ’14: US spot propane prices gain strength as supplies dwindle

HOUSTON (ICIS)--Supplies of propane heading into 2014 are not keeping pace with demand despite projections of increased production of the natural gas liquid (NGL), lending strength to prices.

Production of propane is projected to increase over the next several years. There are also a number of pipeline projects in the works that will increase transportation between the US Gulf (USG) and other high-production regions in the US.

Sources said propane prices may continue strengthen in the near term, as much of the US is inundated with severe winter weather.

According to the Energy Information Administration (EIA), the winter heating season is just beginning to affect consumption figures, so propane demand for the 2013-14 season could continue at a record pace into the spring.

Despite record production, propane supplies were not able to keep up with demand in 2013. US spot propane prices strengthened by 50% in the year, as surging demand kept supplies low.

According to the EIA, propane supplies were at 47.4m bbl for the week ending 20 December, down by 27.7% since the first week of January 2013.

In 2012, propane supplies gained 22.8% for the year.

Market sources said that exports have been a main driver behind this run-up in prices.

In fact, exports from the US are currently estimated to be 288,000 bbl/day, not far from the record of 308,000 bbl/day set in May 2013.

Much of that export activity comes from midstream energy giant Enterprise Products Partners, which opened an expanded liquefied petroleum gas (LPG) export facility at the Houston Ship Channel in the spring of 2013.

The company has already announced plans to not only expand that facility, but also build a new one, bringing Enterprise’s total export capacity to 14m bbl/month.

Additionally, Phillips 66 has announced plans to develop its own LPG export site at Freeport, Texas, to be operational by mid-2016. The company said it will have a capacity of 4.4m bbl/month.